Barclays on U.S. IT Consulting & Computer Services: Thoughts on Europe IT Services; Demand Shift Becoming More Evident
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Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
Rating Summary:
12 Buy, 25 Hold, 6 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
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Barclays on U.S. IT Consulting & Computer Services: Thoughts on Europe IT Services; Demand Shift Becoming More Evident
Barclays analyst says, "Given a more subdued tone around Europe from IT consulting vendors in recent earnings calls, we summarize industry trends and take a closer look at regional Europe exposures in our coverage. Local vendor results show challenges weighted toward banking and public sector; some delays/pricing pressure from Western European banks facing asset exposure to challenged countries; Northern Europe/Scandinavia holding up fairly well amidst softening in the Netherlands and Spain; and greater resilience in offshore IT spend. Based on our industry conversations, we see risks of 2012 deceleration, although with 2009-like spend freezes unlikely, and with offshore outsourcing-focused companies such as CTSH likely to show relative outperformance (given clients' structural needs for cost management)."
Cognizant Technology (Nasdaq: CTSH) (Overweight-rated) derives 18% of revenues from Europe. We estimate exposure skews toward the UK, with modest presence in Northern continental Europe (UK + Scandinavia ~63% of Europe revenues) and larger presence in Switzerland than in Germany, the Netherlands, or France. We estimate ~45% of Europe revenue derives from financial services, with CTSH servicing four of the top ten EU banks (including UBS, although we note that CTSH supports its cost-cutting efforts).
Accenture (NYSE: ACN) (Equalweight-rated) derives ~40% of revenues from EMEA (Middle East/Africa likely 1-2%). ACN is highly exposed to Western continental Europe (while UK is the largest Europe contributor, we estimate Germany, France, Italy, and Spain collectively contribute 45%+ of Europe revenues), with highly multinational clients providing some insulation from local trends. Financial clients ACN has worked with include ABN Amro, BBVA, BNP Paribas, Credit Agricole, Generali France, and Santander.
Computer Sciences (NYSE: CSC) (Equalweight-rated) derives ~25% of revenues from Europe. UK/Scandinavia collectively account for a sizable amount of Europe revenues (we estimate ~60%); however, CSC has material UK public sector exposure (more challenged) and has called out weakness in Germany (we estimate 16% of Europe revenues). CSC's financial clients include Credit Agricole, Swiss Re, UBS, and Zurich Financial Services.
Barclays analyst says, "Given a more subdued tone around Europe from IT consulting vendors in recent earnings calls, we summarize industry trends and take a closer look at regional Europe exposures in our coverage. Local vendor results show challenges weighted toward banking and public sector; some delays/pricing pressure from Western European banks facing asset exposure to challenged countries; Northern Europe/Scandinavia holding up fairly well amidst softening in the Netherlands and Spain; and greater resilience in offshore IT spend. Based on our industry conversations, we see risks of 2012 deceleration, although with 2009-like spend freezes unlikely, and with offshore outsourcing-focused companies such as CTSH likely to show relative outperformance (given clients' structural needs for cost management)."
Cognizant Technology (Nasdaq: CTSH) (Overweight-rated) derives 18% of revenues from Europe. We estimate exposure skews toward the UK, with modest presence in Northern continental Europe (UK + Scandinavia ~63% of Europe revenues) and larger presence in Switzerland than in Germany, the Netherlands, or France. We estimate ~45% of Europe revenue derives from financial services, with CTSH servicing four of the top ten EU banks (including UBS, although we note that CTSH supports its cost-cutting efforts).
Accenture (NYSE: ACN) (Equalweight-rated) derives ~40% of revenues from EMEA (Middle East/Africa likely 1-2%). ACN is highly exposed to Western continental Europe (while UK is the largest Europe contributor, we estimate Germany, France, Italy, and Spain collectively contribute 45%+ of Europe revenues), with highly multinational clients providing some insulation from local trends. Financial clients ACN has worked with include ABN Amro, BBVA, BNP Paribas, Credit Agricole, Generali France, and Santander.
Computer Sciences (NYSE: CSC) (Equalweight-rated) derives ~25% of revenues from Europe. UK/Scandinavia collectively account for a sizable amount of Europe revenues (we estimate ~60%); however, CSC has material UK public sector exposure (more challenged) and has called out weakness in Germany (we estimate 16% of Europe revenues). CSC's financial clients include Credit Agricole, Swiss Re, UBS, and Zurich Financial Services.
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